The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

-Which of the following is an assumption of the monopoly model?
A)There exists a large number of buyers and sellers.
B)There are no close substitutes of the good.
C)The firm faces a horizontal demand curve.
D)There is free entry and exit of firms.
E)The firm is a price taker.

Question

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7
 
-Which of the following is an assumption of the monopoly model?
A)There exists a large number of buyers and sellers. 
B)There are no close substitutes of the good. 
C)The firm faces a horizontal demand curve. 
D)There is free entry and exit of firms. 
E)The firm is a price taker.

Quizplus · Accepted Answer

The assumption of the monopoly model is that there are no close substitutes for the good, meaning that there is no competition from other firms producing similar goods.

The Figure Given Below Shows the Aggregate Demand and Supply